Global equity markets have undergone a savaging in recent times and they’ll never be quite the same again. This means we need to revise our trading tactics as we move into the future. Alan reviews the market's recent past, including past winners, and shows you which shares are likely to be tomorrow’s winners. Alan is a leading expert on Blue Chip shares and the best-selling author of 'Blue Chip Investing' and 'Active Investing'.

Traders and Investors will never agree so the following quotes from Alan sum it up:

"So if you’re trading shares then cash is king.But if you have an income portfolio then it’s time to go shopping…hence Warren Buffet is running around with his cheque book.

Share traders must be prepared to change their trading tactics…the bull market is over.If an income stock’s price goes lower then be prepared to ‘Dollar cost’ average it down.

In either case buy fundamentally sound defensive stocks with very manageable debt."

So one has to decide which of the above they are: Trader Vs Investor? Occasionally you find a person who is both and operate separate portfolios accordingly!

Me, I'm 100% an income investor nowadays. Gave up trading years ago because I like to earn income that continues regardless of whether I get out of bed or not. Essentially I'm lazy Plus I have met a hell of a lot more successful investors than I have traders!

As an experiment find very wealthy retiries and ask them how they got there.

Hi Bill, how do you work out 4500? Are you looking for a 50% retracement?

Regards,
Ilori

Click to expand...

Ilori,

I was just looking at the chart and it's progression over the years and assumed that it will come down to what seems to be a logical level.
I know companies are more profitable these days and therefore should be worth more but at the end of the day a share is only worth what people are willing to pay.

All ords is around 5400 now so not long to go I guess (another -15%?).
Anyway, considering the economic problems we are facing a market turnaround at 4500 points would be good I think.

I say this because the price of oil is increasing our cost of living and inflation is likely to stay at current levels.
Even if the RBA drops int. rates a little the banks probably won't follow so the financial strain on family budgets will remain at high levels.
People will have no option than to cut spending further and this means lower company profits and possibly even lower share market prices.

btw, this is only an assumption, I have no hard evidence that the markets will go either way.

Another issue which may possibly be adding to distorting the upward trend in more recent years is that there is an enormous amount of money being placed in the sharemarket due to the attractiveness of super etc. A sizable amount of this ends up in Aussie shares which is a pretty small market in relative terms. Plus the mandate of many managed funds is that they have to have a certain percentage in Oz shares.

Add to this the likes of the Future Fund etc which I think is currently using State Street and Vanguard index funds to invest their money. Also , some Baby boomers (and there's a lot of them) are moving out of property and shifting it into Super (again often in shares) which is tax free at 60.

So perhaps for some years yet due to these factors the Aussie share market may buck trends of the past. Or maybe not! But again in my case it doesn't matter because of my focus on income and hence I couldn't care less about price volatility other than to top up when our favoured stocks price declines.

I thought the chart speaks for itself.
I am thinking that if it increases in a straight line for many years and all of a sudden we have a massive spike there are 2 things that can happen.

1 it will stay at that level for a while until time catches up with it or
2 it will gradually decline to where it should be.

With all the financial problems, the credit crisis, the Iran clouds approaching, it could take 1 year or more before fear eases and people's confidence returns.
If it takes time for the situation to get back to normal then the chart should be higher.
If it gets back to normal tomorrow then the chart should be lower.

Conclusion
Trend lines can offer great insight, but if used improperly, they can also produce false signals. Other items - such as horizontal support and resistance levels or peak-and-trough analysis - should be employed to validate trend line breaks. While trend lines have become a very popular aspect of technical analysis, they are merely one tool for establishing, analyzing, and confirming a trend. Trend lines should not be the final arbiter, but should serve merely as a warning that a change in trend may be imminent. By using trend line breaks for warnings, investors and traders can pay closer attention to other confirming signals for a potential change in trend.

"Many of the principles applicable to support and resistance levels can be applied to trend lines as well.
It is important that you understand all of the concepts presented in our Support and Resistance article before you continue".Trend Lines - StockCharts.com

If I do enter in again for my non-SMSF investments, I may well do it without leverage (although the returns still have to exceed the returns I could get by parking the money in an offset account).

Click to expand...

Why ungeared?

Cheers
N

Nigel

This is a general comment only and does not constitute advice. Before making legal or financial decisions you should seek advice from a professional adviser, who can take into account your specific circumstances and investment goals.